Government submits to parliament amendments to Affordable Housing Act

Hina - At its Wednesday session, the government adopted the National Housing Policy Plan until 2030 and submitted amendments to the Affordable Housing Act to Parliament.

The changes aim to mitigate the negative impact of rising property prices on first-time buyers and increase the availability of affordable housing.

"Affordable housing is one of the key issues for Croatia and young people. We are striving to achieve three goals through a combination of measures - increasing the availability of affordable housing, improving housing sustainability and ensuring effective land use for residential purposes," said Prime Minister Andrej Plenković, referring to the National Housing Policy Plan.

Alongside this, the government also adopted an Action Plan for 2025-2027, which includes various measures to improve housing accessibility, particularly for individuals with incomes below the national average but above the poverty threshold.

"The National Plan is also crucial for our broader objectives. Demographic revitalisation is one of the most important issues for Croatia - socially, economically and politically. Our key priority is to enable young people to remain in Croatia, build their families here and find employment. Additionally, we aim to attract skilled professionals to settle in areas with labour shortages," Plenković emphasised.

The Action Plan, which operationalises the housing strategy, has a budget of €683 million.

Deputy Prime Minister and Minister of Physical Planning, Construction and State Assets, Branko Bačić, highlighted that out of 2.39 million housing units in Croatia, 40% are not in use, while the price of new housing has increased by 54% over the past five years.

Increase in POS housing prices to €1,912 per m2

As part of the National Plan, the government has submitted amendments to the Affordable Housing Act (POS) to Parliament. Additionally, a new Affordable Housing Act is expected to be introduced later this year.

Due to a significant rise in construction costs and property prices, public procurement processes for POS housing projects have frequently been cancelled. Developers lack financial incentives to participate due to statutory price limits, making project execution increasingly difficult.

The government’s proposal highlights that no new POS housing projects were contracted in 2024. A comprehensive housing market analysis by the Zagreb Institute of Economics found a shortfall of 236,731 housing units in Croatia.

To address this, the proposed amendments seek urgent parliamentary approval to raise the maximum sale price of POS housing from €1,792.50 to €1,912 per square metre, aligning it with the 2024 market average.

"With the current legislative framework, it is nearly impossible to implement affordable housing projects. We already have around 1,000 flats with building permits ready to go, but we need to amend the law to proceed," Bačić explained.

50% VAT refund for first-time buyers under 45

A key new measure is that first-time homebuyers under the age of 45 will be eligible for a 50% refund on VAT when purchasing or building their first property.

To qualify, applicants must be Croatian citizens under 45. They must not own or have previously owned a residential property in Croatia or abroad, either individually or jointly with their immediate family (spouse, common-law partner, life partner or children) as of 1 January 2025. They also must have their registered residence at the purchased property’s address.

The VAT refund also applies to individuals building their first home, provided that the occupancy permit for the family house becomes legally valid after 1 January 2025 and all related expenses are properly documented.

Exceptions apply to applicants who previously owned inadequate housing (e.g., properties lacking essential infrastructure or failing hygiene and safety standards) and sold it to purchase a larger home.

Those who have already received state housing subsidies, including subsidised mortgages or government-backed housing guarantees, are not eligible for the refund.

Affordable rental scheme with owner compensation for vacant properties

The government is also launching an affordable rental programme to encourage property owners to rent out long-vacant housing. The initiative aims to assist citizens unable to secure housing through the open market.

Under the scheme, existing residential properties will be rented out at below-market rates. The State Real Estate Agency (APN) will acquire properties through public tenders from state institutions, local authorities, and private owners. These properties will be leased for a minimum of three years, with extensions of up to ten years.

To incentivise participation, APN will compensate property owners for leasing their housing under the scheme, with payments based on contract duration and local median rental prices.

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